After eight years of hosting the UKJFF, The Tricyle Theater had said it would condition hosting this year's festival on it rejecting funding from Israel's London embassy, which donated a relatively small sum towards the event.

Organizers rejected the condition, and leading British Jewish figures angrily condemned the move as anti-Semitic, noting that no other country had ever been similarly targeted and that forcing Jews to sever ties with their homeland was unacceptable.

Tricycle initially defended its decision but has now backtracked and said the UKJFF will be invited next year "with no restrictions on funding", after many of its own Jewish sponsors withdrew their funding in protest.

In a joint statement, the Tricycle Theater and UKJFF organizers said the decision had been reversed following "lengthy discussions".

"Some weeks ago the UKJFF fell out, very publicly, with the Tricycle over a condition imposed by the Tricycle regarding funding," read the statement. "This provoked considerable public upset. Both organisations have come together to end that."

"Following lengthy discussions between the Tricycle and UKJFF, the Tricycle has now withdrawn its objection and invited back the UK Jewish Film Festival on the same terms as in previous years, with no restrictions on funding from the Embassy of Israel in London," it continued.

"The UKJFF and the Tricycle have agreed to work together to rebuild their relationship and, although the festival is not able to return in 2014, we hope to begin the process of rebuilding trust and confidence with a view to holding events in the future."

The decision to effectively boycott a flagship Jewish cultural event came as British Jews experienced the second-worst rise in anti-Semitism since records began, and amid an unprecedented spike in anti-Semitism throughout Europe, where hate crimes are already driving large-scale Jewish emigration, mainly to Israel.